Use the Table for the Question(s)below

question 33

Multiple Choice

Use the table for the question(s) below.
Consider the following realized annual returns:

-The average annual return on the S&P 500 from 1996 to 2005 is closest to:

• A)8.75%
• B)4.00%
• C)7.10%
• D)9.75%
• E)5.85%

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Definitions:

Strike Price

The set price at which an option contract can be bought or sold when it is exercised.

Pre-Tax Net Profit

The amount of profit earned by a company before taxes are deducted.

Time Value

Refers to the concept that money available at the present time is worth more than the identical sum in the future due to its potential earning capacity.

Option

A financial derivative that gives the buyer the right, but not the obligation, to buy or sell an asset at a specified price within a certain period.